Funds Not Used, Work Not Cleared in Key Schemes For India’s Burgeoning Cities

Mumbai: By 2050, India will record the world’s highest urbanisation rate--497 million more residents, or 60% of the country’s population, will move into its cities, according to the United Nations’ 2011 Revision of the World Urbanisation Prospectsreport. Over the same period, China will see 341 million people shifting into cities, Nigeria 200 million, the United States 103 million, and Indonesia 92 million.

With the 2019-20 budget set to be released in an election year, urban India can expect a bigger slice of the pie, experts estimate. But with the government lagging behind its targets, development in the sector remains dismal, showed an IndiaSpend analysis of available government data.

Here are our main findings:

While the union budget expenditure on urban development in 2018-19 was the highest ever, as a share of the grand total this had actually declined by 0.2 percentage points to 1.7% of the budget.

Barely 7-20% of the central assistance earmarked for the three flagship schemes have been used since their launch, indicating that states remain chronically underfunded.

In the three schemes, work has been sanctioned for not more than a third of the set targets which will meet their deadlines in 2019-20 and 2021-22. The number of works actually completed is even lower.

On January 28, 2019, IndiaSpend contacted the ministry of housing and urban affairs for comments. We will update the story if and when they respond.

Why we need to pay attention to urban development

Over a century to 2001, the population residing in India’s urban areas grew by 17.1 percentage points to 28.5%. By 2011, this grew to 30% with 377 million Indians now residing in urban areas. In 20 years to 2031, the population is expected to double to over 600 million or 41% of the country.

The Indian economy is expected to grow alongside the urban population expansion as cities and towns offer several entrepreneurship and employment opportunities. More than 60% of the country’s gross domestic product (GDP) is generated in urban areas, the government said in this 2014-15 standing committee report. The country's 100 largest cities, which hold 16% of the population and occupy 0.24% of its land area, produce 43% of its GDP.

Rural-urban linkages need to be strengthened for “comprehensive and inclusive development”, the government said. The transition to a quasi-urban society has to be accompanied by a commensurate increase in the supply of housing and basic urban services such as water supply, sewerage and drainage network, garbage disposal facilities, and planned urban mobility, it added.

Despite the government’s recognition of the fact that unbridled urbanisation can lead to a rise in slums, worsening environmental conditions, and a decline in standard of living, the problem is set to snowball with not only continued rural distress and migration, but also the expansion of villages into small towns.

About 190 million Indians--equivalent to the combined population of Bangladesh and Sri Lanka--live in overgrown 'villages', according to a new study, IndiaSpendreported on January 23, 2019. Classified as ‘large’ and ‘very large’ villages--less than 25% of their population is engaged in non-agricultural work--these areas continue to miss out on urban infrastructure, housing and basic services necessary for sustainable living in densely populated regions.

How is government spending on urban development?

As we mentioned earlier, current spending on urban development constitutes 1.7% of the total budget, a 0.2-percentage-point decline since 2017-18 when it was 1.9%--the highest in a decade, showed an IndiaSpend analysis of budget data over 10 years since 2009.

In 2018, finance minister Arun Jaitley allocated Rs 41,765.13 crore for urban development--a 64% increase from 2014 when the NDA took charge of the government from the Congress-led United Progressive Alliance (UPA) government. This is actually a 2.8% increase over the previous year 2017-18, when the NDA merged the ministry of housing and poverty alleviation and the ministry of urban development. In 2017, the allocation had grown a significant 35.7% from 2016-17.

Still, the highest rate of increase in expenditure allocation for the two urban ministries was recorded in 2014, when the UPA released its interim budget before the general elections of May 2014--the urban budget then rose 108.8% from Rs 11,831 crore to Rs 24,702 crore, and its share of the grand total rose from 0.7% to 1.4%. When the NDA came to power a few months later, they increased the allocation by 3% to Rs 25,548 crore.

How NDA’s flagship schemes are faring

Smart Cities Mission:

For the mission, the government has so far allotted Rs 16,604 crore, roughly a third of the promised outlay of Rs 48,000. Of this, Rs 3,560 crore has so far been utilised, 7% of the programme’s outlay, according to this Lok Sabha response by the ministry on January 1, 2019.

The mission is supposed to transform 100 cities into “smart cities” by 2022, through the application of information and communications technology to manage basic services such as water supply, sanitation, housing, waste management and mobility.

With a budget of Rs 48,000 crore, the Centre was to invest Rs 500 crore per city. The state governments had to put in a matching contribution through private investments in projects. The mission could be implemented either as a “pan-city” programme that incorporates information technology (IT) with the use of public infrastructure across the city, or as an “area-based development” which introduces IT infrastructure in a smaller portion of the city.

In terms of physical progress, the ministry has approved 5,151 projects worth Rs. 2.05 lakh crore for the selected 100 cities, according to this Lok Sabha response by the ministry on December 11, 2018. As of November 30, 2018, work on less than a third of these--or 1,675 projects--worth Rs. 51,866 crore (25% of the approved cost) is being done, the response further said. It is unclear how many of those projects have so far been completed.

The mission also came for criticism from the latest standing committee meeting on urban development held in July 2018. While the budget allocation over the last three years for the scheme has been over Rs 15,000 crore, “the revised expenditure is much lower at around Rs 10,094 crore with an even lower actual expenditure”, the committee observed in its report, adding it was “perplexed” about this.

“The committee observe numerous instances of one agency undoing the work of another agency and strongly feel that lack of coordination between implementing agencies is a major reason why the intended benefits are still not visible to public,” the committee said, adding that it had reservations about the mission causing “uneven development” in the areas surrounding smaller towns.

Of projects worth Rs 2.03 lakh crore, 21%--worth Rs 43,088 crore--are being carried out in convergence with other schemes, the ministry told the standing committee in its response.

AMRUT, like its predecessor, the Jawaharlal Nehru National Urban Renewal Mission (JNNURM), aims to develop basic urban infrastructure. For five years upto 2019-20, and with a focus on water supply, sewerage, septage management and stormwater drains, the government has so far allotted 27% or Rs 13,447 crore of the Rs 50,000 crore central assistance promised to states. Of this, Rs 9,877 crore (19.88%) has so far been utilised, according to this Lok Sabha response by the ministry on January 1, 2019.

Upto July 2018, the ministry had approved State Annual Action Plans--proposed by states as plans for each year--under the programme to the size of Rs 77,640 crore for various infrastructure projects, it informed the standing committee. Of this, 50% of project funds have been allotted to water supply works, 42% to sewerage and septage management and the rest to other components included in the AMRUT scheme. As many of these works are capital-intensive long-term projects, they are expected to be completed in three years, the government said.

While real-time information on actual implementation of the scheme at the ground-level across India remains unavailable, here are some achievements made under the programme:

In the water supply sector, contracts for 600 projects worth Rs 21,762 crore had been awarded as of July 2018, according to data presented by the ministry in its reply to the standing committee in July 2018, the latest and only data available in public. Of these, 42 projects, or 7%, worth Rs 112 crore (0.5% of awarded contracts’ worth) had been completed.

In the sewerage and septage management sector, contracts for 318 projects worth Rs 15,058 crore had been awarded, and four projects (1.3%) worth Rs 12 crore (0.07% of approved spending) had been completed as of July 2018.

In the storm water drainage sector, contracts for 71 projects worth Rs 1,139 crore had been awarded and 11 projects (15%) worth Rs 4 crore (0.3%) have been completed, the ministry said.

PMAY (U): Of the Rs 1 lakh crore worth of central assistance sanctioned so far for constructing homes under the PMAY scheme, which is an amalgamation of previous housing schemes, about a third of funds, or Rs 33,652 crore, have been allocated and 20% or Rs 20,892 crore actually utilised, according to the Lok Sabha response from January 1, 2019.

Of a targeted 12 million houses to be constructed under the PMAY urban scheme, as of December 10, 2018, 6.8 million or 56% had been sanctioned for construction, according to this press release. Of these, 3.5 million or 29% of the target had been grounded for construction and 1.2 million houses (10%) had been completed, the ministry said. In the next three financial years, to meet its target of 12 million houses by 2022, the government will have to finish construction on roughly 9,813 houses across India every day.

Data on the government’s actual progress of its urban schemes remain inconsistent, making it difficult to assess their progress, experts who we spoke to pointed out. This is especially so for centrally-sponsored schemes such as Smart Cities, and AMRUT, where states are expected to meet some part of the cost and maintain records of implementation. “It is difficult to gauge what exactly is happening at the implementation-level of the programmes. We can’t rely on any of the figures,” Nilanchala Acharya, research coordinator at the Centre for Budget and Governance Accountability (CBGA), a Delhi-based think-tank, told IndiaSpend.

Experts also complained about the lack of clarity and accountability. “There is absolutely no transparency in the way these schemes are functioning. It is obvious there are overlaps and no clear accountability for various works under different schemes,” T R Raghunandan, advisor to Accountability Initiative of the Centre for Policy Research, a Delhi-based think-tank, told IndiaSpend.

What the urban sector needs right now

The upcoming budget is likely to increase its spending on urban India, experts said, but will probably focus more on highly publicised projects that mainly serve the middle and upper classes. “It is likely that the government will allot over Rs 51,000 crore for the urban sector--in absolute figures, this is high but when you adjust it for inflation, it is not that much of an increase,” Acharya said. He added there is likely to be more funding for water supply projects, and the Smart Cities Mission this election year as it has quicker, tangible output compared to other schemes.

But the budget for urbanisation needs to focus more spending on the social sector. “Current schemes are directed towards serving 20-30% of the urban population who comprise the city’s elite--we need to focus on urban healthcare, livelihoods, affordable public transport, public housing, community centres and parks to improve the all-round quality of life,” Acharya said.

Experts also welcome more investment in the rural sector as it may help stall the burgeoning pressure on cities. “People come to cities in search of jobs, it is necessary to try and ease the distress migration by focusing on these rural linkages,” Acharya said.

Raghunandan believes that while the government needs to focus more on urban development, it has to do this by empowering local urban governments. “Obviously a lot more money needs to be pumped into the urban sector but we need decentralisation of power for the money to be actually used,” he said.

While the UPA’s JNNURM programme intended (but eventually failed) to offer states monetary incentives to bring in reforms aimed at strengthening participatory governance, the new flagship schemes, run by special purpose vehicles (SPVs), discourage the decentralisation of power to urban local bodies and citizens altogether, Raghunandan said.

“Citizens have no say in how they want their city to develop,” he said. “We can’t have smart cities without streamlining processes and fixing accountability.”

(Saldanha is an assistant editor with IndiaSpend.)

We welcome feedback. Please write to respond@indiaspend.org. We reserve the right to edit responses for language and grammar.

Mumbai: By 2050, India will record the world’s highest urbanisation rate--497 million more residents, or 60% of the country’s population, will move into its cities, according to the United Nations’ 2011 Revision of the World Urbanisation Prospectsreport. Over the same period, China will see 341 million people shifting into cities, Nigeria 200 million, the United States 103 million, and Indonesia 92 million.

With the 2019-20 budget set to be released in an election year, urban India can expect a bigger slice of the pie, experts estimate. But with the government lagging behind its targets, development in the sector remains dismal, showed an IndiaSpend analysis of available government data.

Here are our main findings:

While the union budget expenditure on urban development in 2018-19 was the highest ever, as a share of the grand total this had actually declined by 0.2 percentage points to 1.7% of the budget.

Barely 7-20% of the central assistance earmarked for the three flagship schemes have been used since their launch, indicating that states remain chronically underfunded.

In the three schemes, work has been sanctioned for not more than a third of the set targets which will meet their deadlines in 2019-20 and 2021-22. The number of works actually completed is even lower.

On January 28, 2019, IndiaSpend contacted the ministry of housing and urban affairs for comments. We will update the story if and when they respond.

Why we need to pay attention to urban development

Over a century to 2001, the population residing in India’s urban areas grew by 17.1 percentage points to 28.5%. By 2011, this grew to 30% with 377 million Indians now residing in urban areas. In 20 years to 2031, the population is expected to double to over 600 million or 41% of the country.

The Indian economy is expected to grow alongside the urban population expansion as cities and towns offer several entrepreneurship and employment opportunities. More than 60% of the country’s gross domestic product (GDP) is generated in urban areas, the government said in this 2014-15 standing committee report. The country's 100 largest cities, which hold 16% of the population and occupy 0.24% of its land area, produce 43% of its GDP.

Rural-urban linkages need to be strengthened for “comprehensive and inclusive development”, the government said. The transition to a quasi-urban society has to be accompanied by a commensurate increase in the supply of housing and basic urban services such as water supply, sewerage and drainage network, garbage disposal facilities, and planned urban mobility, it added.

Despite the government’s recognition of the fact that unbridled urbanisation can lead to a rise in slums, worsening environmental conditions, and a decline in standard of living, the problem is set to snowball with not only continued rural distress and migration, but also the expansion of villages into small towns.

About 190 million Indians--equivalent to the combined population of Bangladesh and Sri Lanka--live in overgrown 'villages', according to a new study, IndiaSpendreported on January 23, 2019. Classified as ‘large’ and ‘very large’ villages--less than 25% of their population is engaged in non-agricultural work--these areas continue to miss out on urban infrastructure, housing and basic services necessary for sustainable living in densely populated regions.

How is government spending on urban development?

As we mentioned earlier, current spending on urban development constitutes 1.7% of the total budget, a 0.2-percentage-point decline since 2017-18 when it was 1.9%--the highest in a decade, showed an IndiaSpend analysis of budget data over 10 years since 2009.

In 2018, finance minister Arun Jaitley allocated Rs 41,765.13 crore for urban development--a 64% increase from 2014 when the NDA took charge of the government from the Congress-led United Progressive Alliance (UPA) government. This is actually a 2.8% increase over the previous year 2017-18, when the NDA merged the ministry of housing and poverty alleviation and the ministry of urban development. In 2017, the allocation had grown a significant 35.7% from 2016-17.

Still, the highest rate of increase in expenditure allocation for the two urban ministries was recorded in 2014, when the UPA released its interim budget before the general elections of May 2014--the urban budget then rose 108.8% from Rs 11,831 crore to Rs 24,702 crore, and its share of the grand total rose from 0.7% to 1.4%. When the NDA came to power a few months later, they increased the allocation by 3% to Rs 25,548 crore.

How NDA’s flagship schemes are faring

Smart Cities Mission:

For the mission, the government has so far allotted Rs 16,604 crore, roughly a third of the promised outlay of Rs 48,000. Of this, Rs 3,560 crore has so far been utilised, 7% of the programme’s outlay, according to this Lok Sabha response by the ministry on January 1, 2019.

The mission is supposed to transform 100 cities into “smart cities” by 2022, through the application of information and communications technology to manage basic services such as water supply, sanitation, housing, waste management and mobility.

With a budget of Rs 48,000 crore, the Centre was to invest Rs 500 crore per city. The state governments had to put in a matching contribution through private investments in projects. The mission could be implemented either as a “pan-city” programme that incorporates information technology (IT) with the use of public infrastructure across the city, or as an “area-based development” which introduces IT infrastructure in a smaller portion of the city.

In terms of physical progress, the ministry has approved 5,151 projects worth Rs. 2.05 lakh crore for the selected 100 cities, according to this Lok Sabha response by the ministry on December 11, 2018. As of November 30, 2018, work on less than a third of these--or 1,675 projects--worth Rs. 51,866 crore (25% of the approved cost) is being done, the response further said. It is unclear how many of those projects have so far been completed.

The mission also came for criticism from the latest standing committee meeting on urban development held in July 2018. While the budget allocation over the last three years for the scheme has been over Rs 15,000 crore, “the revised expenditure is much lower at around Rs 10,094 crore with an even lower actual expenditure”, the committee observed in its report, adding it was “perplexed” about this.

“The committee observe numerous instances of one agency undoing the work of another agency and strongly feel that lack of coordination between implementing agencies is a major reason why the intended benefits are still not visible to public,” the committee said, adding that it had reservations about the mission causing “uneven development” in the areas surrounding smaller towns.

Of projects worth Rs 2.03 lakh crore, 21%--worth Rs 43,088 crore--are being carried out in convergence with other schemes, the ministry told the standing committee in its response.

AMRUT, like its predecessor, the Jawaharlal Nehru National Urban Renewal Mission (JNNURM), aims to develop basic urban infrastructure. For five years upto 2019-20, and with a focus on water supply, sewerage, septage management and stormwater drains, the government has so far allotted 27% or Rs 13,447 crore of the Rs 50,000 crore central assistance promised to states. Of this, Rs 9,877 crore (19.88%) has so far been utilised, according to this Lok Sabha response by the ministry on January 1, 2019.

Upto July 2018, the ministry had approved State Annual Action Plans--proposed by states as plans for each year--under the programme to the size of Rs 77,640 crore for various infrastructure projects, it informed the standing committee. Of this, 50% of project funds have been allotted to water supply works, 42% to sewerage and septage management and the rest to other components included in the AMRUT scheme. As many of these works are capital-intensive long-term projects, they are expected to be completed in three years, the government said.

While real-time information on actual implementation of the scheme at the ground-level across India remains unavailable, here are some achievements made under the programme:

In the water supply sector, contracts for 600 projects worth Rs 21,762 crore had been awarded as of July 2018, according to data presented by the ministry in its reply to the standing committee in July 2018, the latest and only data available in public. Of these, 42 projects, or 7%, worth Rs 112 crore (0.5% of awarded contracts’ worth) had been completed.

In the sewerage and septage management sector, contracts for 318 projects worth Rs 15,058 crore had been awarded, and four projects (1.3%) worth Rs 12 crore (0.07% of approved spending) had been completed as of July 2018.

In the storm water drainage sector, contracts for 71 projects worth Rs 1,139 crore had been awarded and 11 projects (15%) worth Rs 4 crore (0.3%) have been completed, the ministry said.

PMAY (U): Of the Rs 1 lakh crore worth of central assistance sanctioned so far for constructing homes under the PMAY scheme, which is an amalgamation of previous housing schemes, about a third of funds, or Rs 33,652 crore, have been allocated and 20% or Rs 20,892 crore actually utilised, according to the Lok Sabha response from January 1, 2019.

Of a targeted 12 million houses to be constructed under the PMAY urban scheme, as of December 10, 2018, 6.8 million or 56% had been sanctioned for construction, according to this press release. Of these, 3.5 million or 29% of the target had been grounded for construction and 1.2 million houses (10%) had been completed, the ministry said. In the next three financial years, to meet its target of 12 million houses by 2022, the government will have to finish construction on roughly 9,813 houses across India every day.

Data on the government’s actual progress of its urban schemes remain inconsistent, making it difficult to assess their progress, experts who we spoke to pointed out. This is especially so for centrally-sponsored schemes such as Smart Cities, and AMRUT, where states are expected to meet some part of the cost and maintain records of implementation. “It is difficult to gauge what exactly is happening at the implementation-level of the programmes. We can’t rely on any of the figures,” Nilanchala Acharya, research coordinator at the Centre for Budget and Governance Accountability (CBGA), a Delhi-based think-tank, told IndiaSpend.

Experts also complained about the lack of clarity and accountability. “There is absolutely no transparency in the way these schemes are functioning. It is obvious there are overlaps and no clear accountability for various works under different schemes,” T R Raghunandan, advisor to Accountability Initiative of the Centre for Policy Research, a Delhi-based think-tank, told IndiaSpend.

What the urban sector needs right now

The upcoming budget is likely to increase its spending on urban India, experts said, but will probably focus more on highly publicised projects that mainly serve the middle and upper classes. “It is likely that the government will allot over Rs 51,000 crore for the urban sector--in absolute figures, this is high but when you adjust it for inflation, it is not that much of an increase,” Acharya said. He added there is likely to be more funding for water supply projects, and the Smart Cities Mission this election year as it has quicker, tangible output compared to other schemes.

But the budget for urbanisation needs to focus more spending on the social sector. “Current schemes are directed towards serving 20-30% of the urban population who comprise the city’s elite--we need to focus on urban healthcare, livelihoods, affordable public transport, public housing, community centres and parks to improve the all-round quality of life,” Acharya said.

Experts also welcome more investment in the rural sector as it may help stall the burgeoning pressure on cities. “People come to cities in search of jobs, it is necessary to try and ease the distress migration by focusing on these rural linkages,” Acharya said.

Raghunandan believes that while the government needs to focus more on urban development, it has to do this by empowering local urban governments. “Obviously a lot more money needs to be pumped into the urban sector but we need decentralisation of power for the money to be actually used,” he said.

While the UPA’s JNNURM programme intended (but eventually failed) to offer states monetary incentives to bring in reforms aimed at strengthening participatory governance, the new flagship schemes, run by special purpose vehicles (SPVs), discourage the decentralisation of power to urban local bodies and citizens altogether, Raghunandan said.

“Citizens have no say in how they want their city to develop,” he said. “We can’t have smart cities without streamlining processes and fixing accountability.”

(Saldanha is an assistant editor with IndiaSpend.)

We welcome feedback. Please write to respond@indiaspend.org. We reserve the right to edit responses for language and grammar.

Alison Saldanha
- Alison last reported for The Caravan. She was previously a correspondent with the Indian Express, primarily covering the municipal corporation and other governing agencies in Mumbai. On occasion, she also covered the courts and crime. She has worked with urban-sector non-profits Janaagraha (in Bengaluru) and the Urban Design Research Institute (in Mumbai). She is a post-graduate of the Asian College of Journalism, Chennai, and a history graduate of St. Xavier’s College, Mumbai.